EUA price forecast: Carbon to double by 2026

We expect market participants to increasingly turn their attention to the upcoming shortages in the market – 2027 is set to be a very tight year. Amidst the overall fit for 55 framework that reduces supply of fresh allowances, the market stability reserve continues to eat into the remaining surplus, working on an accelerated pace to account for the additional volumes put on the market to finance the REPowerEU programme.

The near-term forecast is sensitive to policy decisions whether to adjust REPowerEU EUA auction volumes in light of actual carbon prices. We have reassessed some of the key assumptions underlying our last price forecast from July 2024. Most importantly, we no longer believe the Commission will ramp up the REPowerEU volumes next year. This is the main reason for the 2 euros uptick in prices next year compared to our previous forecast.

The carbon price so far in 2024: between 52 and 76 euros European front-Dec carbon price started the year around the EUR 75 level, then quickly began slipping steadily, from a combination of gas squeezing coal out of the electricity mix, mild winter wea…